Mirror Review
June 18, 2025
Summary:
- The U.S. Senate passed the GENIUS Stablecoin Bill in a 68-30 bipartisan vote.
- The bill sets up the first federal framework for stablecoins—digital currencies pegged to the U.S. dollar.
- It now moves to the House, where a competing version must be reconciled before becoming law.
The “Guiding and Establishing National Innovation for U.S. Stablecoins Act,” or GENIUS Act, sets up federal guardrails for a specific type of cryptocurrency called a stablecoin.
These digital tokens are pegged to a stable asset, with about 99% tied to the U.S. dollar.
Key provisions of the bill include:
- Full reserve backing, meaning issuers must hold one dollar’s worth of safe, liquid assets for every digital dollar they create.
- Monthly audits and compliance with anti-money laundering laws.
- Sweeping authority for the Department of Treasury to oversee the market.
Furthermore, the crypto industry, which invested around $200 million in the 2024 election cycle, sees this as a historic victory that could turbocharge adoption.
Now, as the U.S. Senate passed the GENIUS stablecoin bill with a 68-30 vote, many hail it as a new era of financial innovation.
But for those who know their history, the bill mirrors some of the infamous features of America’s “Wild West” financial past.
Supporters say this move will modernize payments and cement U.S. dollar dominance. But the bill also gives hundreds of companies the power to issue their own digital money!
Moreover, economist Dr. Barry Eichengreen emphasized, saying America tried a similar system more than 150 years ago, and “it unleashed chaos and financial ruin.”
So here are five parallels between the new GENIUS stablecoin bill and the chaotic Free Banking Era of the 1800s.
1. A Mistrust of Centralized Power
The “free banking” movement in the 1800s was a period in U.S. history where states allowed almost anyone to start a bank, as long as they met certain rules, like depositing bonds with the state.
This system, which primarily took place from 1837 to 1864, came about because many Americans, especially those in the “Jacksonian Democrat” movement, deeply mistrusted powerful, centralized financial institutions.
This led President Andrew Jackson to veto the Bank of the United States‘ charter in 1832.
Today, a similar sentiment drives the crypto movement, which aims to cut out most middlemen like banks and legacy payment rails.
2. Allowing Almost Anyone to Issue Money
After the central bank’s power was dismantled in the 1830s, about half of the states passed laws allowing almost anyone with a minimum amount of capital to open a bank and issue their own unique dollars.
Now, the GENIUS stablecoin bill creates a modern-day equivalent.
It opens the door for a broad range of issuers—including banks, fintechs, and major retailers—to launch their own stablecoins under the federal government’s framework.
3. The Illusion of 1-to-1 Backing
The Free Banking system was built on a promise that sounds very familiar: every dollar issued by a bank had to be backed by $1 of collateral.
The GENIUS stablecoin bill has a similar requirement for issuers to hold $1 of liquid assets, like U.S. Treasury securities, for every $1 stablecoin.
- The History:
In the 19th century, this system often failed. In states with lax regulation, the assets backing the currency were “sometimes all but worthless,” leading to panics and bank runs.
- The Modern Risk:
Critics warn that we are being wildly optimistic to assume regulators can perfectly oversee hundreds of issuers today.
After all, regulators failed to prevent the collapse of Silicon Valley Bank just two years ago, even after realizing its assets were losing value.
4. Multiple Currencies, Multiple Headaches
The 19th-century system destroyed something every economy needs: the “singleness” of money.
With different banks issuing different notes, shopkeepers had to inspect every single dollar, rejecting some and accepting others at a discount.
Customers wouldn’t know the final price of an item until this “unwieldy process” was finished.
If modern regulators fall short, we could face a similar scenario with “countless stablecoins all worth different amounts of money,” bringing our highly integrated payment system to problems.
5. The Threat of Contagion and Taxpayer Bailouts
When banks failed in the 1800s, the system was simple enough that a few failures didn’t collapse the entire economy.
That is no longer the case.
In 2023, rumors on social media helped trigger the run on Silicon Valley Bank. This incident proved the speed with which modern financial crises can unfold and spread.
Yet, the government stepped in to bail out all customers—even those with deposits over the $250,000 insured limit—because it feared a “contagious loss of confidence” could destabilize the entire banking system.
End Note
The GENIUS Act barely made it through the Senate, after tough talks. As Senator Cynthia Lummis said, “I had no idea how hard this was going to be.”
Now, it goes to the House of Representatives, which has its own bill called the STABLE Act.
These two bills are very different, especially on who gets to control stablecoins.
Fixing these differences will be hard, so there’s a chance that the GENIUS bill might not become law.
Ultimately, whether this new framework proves to be a good idea or a dangerous precedent, only time will tell.
